The latest NCB Services PMI release, covering the month of November, provides much to be cheerful about. The headline Business Activity (56.1) index is unchanged from the five-year high recorded in the previous month. Companies in the services sector are upbeat about their prospects, with the ‘Expected Levels in 12 Months’ Time’ reading at its highest level in eight months.
New Business has been in positive territory for four months now. This has been partly driven by New Export Business, continuing an unbroken expansionary trend that stretches back to August 2011, and also by new client wins domestically. This improved demand has helped bolster Employment (which recorded a third successive monthly increase and the sharpest rate of expansion in 63 months) within the sector.
The Services PMI surveys four sectors – Business Services, Financial Services, TMT and Transport & Leisure. All of these reported growth in business activity during the month, save for Transport & Leisure. This is something of a surprise given the robust growth recorded in that segment in October, however, given that the ‘Expected Levels in 12 Months’ Time’ reading for Transport & Leisure was little changed relative to the previous month this may be just a blip as opposed to the start of a new trend.
For some time now we have noted the divergence between Input Costs (rising) and Output Prices (falling) for the sector. This suggests that discounting is continuing to play a role in supporting growth for Services firms, leading to some companies sacrificing margins in order to drive top-line growth.
We described the results of last month’s NCB Services PMI release as “an impressive performance given the broader economic backdrop”. With the overall picture little changed since then, we would echo that description for today’s release.
Philip O’Sullivan, Chief Economist, NCB Stockbrokers Limited.